ST. LOUIS — The U.S. Court of Appeals for the Eight Circuit has upheld a ruling in favor of Cincinnati Insurance Co. (CIC) over a dispute involving property loss following a devastating New Year's Eve tornado in 2010. 

In a ruling filed on Aug. 16, the appeals court affirmed summary judgment for CIC in a case brought by Olga Despotis Trust on claims of breach of contract and refusing to pay the full amount of an insurance claim.

The dispute involved the actual and replacement cost value of a medical imaging facility owned by the trust in Sunset Hills. On Feb. 15, 2011, trustee Dr. George Despotis submitted a proof of loss claim for $1.4 million. However, in response, CIC determined the actual cash value of the building was only $800,000.

Within 15 days of receiving the loss claim, CIC issued the trust a check for $813,931, which the trust disputed.

Months later, CIC sought to invoke the policy's appraisal provision, which the trust rejected as "unproductive." The trust then sought to settle, which CIC rejected.

Suit followed in state court, with CIC removing it to federal court. The case sat for 18 months and was then voluntarily dismissed without prejudice.

The trust then refiled in the U.S. District Court for the Eastern District of Missouri, alleging breach of contract, vexatious refusal and declaratory judgment.

During the course of litigation, the court ordered the parties to participate in an appraisal process, with a panel ultimately determining the actual cash value loss at $1.056 million and a total replacement cost of $1.5 million. CIC paid the remaining actual cash value of $256,000 and an additional $22,658.28 for lost rental income.

The trust argued it was entitled to replacement cost and sought to amend its complaint to allege that CIC breached the contract by failing to pay the replacement cost. However, District Judge Ronnie L. White denied the motion to amend.

"The amended complaint would require additional discovery that would necessarily delay resolution of this already extremely protracted litigation," White held, adding that the "unexcused delay would unduly prejudice [the] defendant because of the advanced nature of this case."

In siding with CIC, White held that the trust could not maintain a breach claim based on a payment that occurred in March 2011 before the parties fully engaged in the appraisal process, which was not completed until August 2015.

He also found that CIC could not have breached the contract by not paying the replacement cost because the trust failed to replace property damage within two years of the loss. White also denied the vexatious relief sought based on conduct that occurred before the appraisal process was finished because "such a holding would subvert the appraisal process," according to the district court ruling.

The three-judge appellate panel affirmed White's decision. The panel included William Jay Riley, Raymond Gruender and James Gritzner of the Southern District of Iowa, sitting by designation.

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